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New Patentable Idea: A Way to Invalidate Vague Patents

By Brad Stone March 5, 2008 4:45 pmMarch 5, 2008 4:45 pm

There’s not much love in legal circles for the so-called “business method” patent, an exclusive intellectual property right over a novel way of doing business. Critics of such patents – think Amazon “One Click” or Priceline’s “name your own price” patents – argue that they clog up the United States Patent and Trademark Office, lead to excessive litigation and have little connection to real, physical invention.

Now the patent law community is closely watching one case in particular and speculating that federal judges could invalidate business method patents sometime this year. The case, generally known as re Bilski, involves a method for managing the risk of bad weather to crops by making hedged trades in the commodities markets. The 12 judges of the United States Court of Appeals for the Federal Circuit have agreed to hear the caseen banc, or in a single joint session in May, and have suggested that they might reconsider the ruling on State Street Bank & Trust Co. v. Signature Financial Group Inc., which helped to inaugurate the age of business method patents a decade ago.

“Bilski will be a closely followed appeal, as the Federal Circuit may be looking to overturn past precedent,” says patent litigator Alan Fisch of Kaye Scholer, a law firm in Washington. “This case has the potential to end business method patents as we know them today.”

Another patent expert, Kevin Rivette, the former vice president for intellectual property strategy at I.B.M., thinks Bilski could wind up before the Supreme Court, which has recently shown a willingness to correct the excesses of an overburdened patent office. “I think this is the unraveling of business method patents, yes. I think there is a process we are going to go through to get there and the Supreme Court is going to be the one that decides it,” he said.

The death of business method patents could be felt strongest in Silicon Valley, where a first step of many entrepreneurs is to retreat with lawyers to start patenting defensible business ideas. It could also affect patent acquisition firms such as Intellectual Ventures, a firm financed by major technology companies like Microsoft, Google, Intel, Apple and Nokia, that is aggressively accumulating patent portfolios.

Other recent coverage of Bilski and its potential impact can be found here and here.

But not everyone agrees business method patents are doomed. Greg Aharonian, editor of the Internet Patent News Service, reels off a number of reasons that judges may reject the claims in Bilski without damaging the patent class as a whole, including a law passed by Congress that protects prior use rights for business methods.

But perhaps his best argument is this one: “Definitions of business method patents always end up being circular,” he said. “You can’t really ban something unless you can define it and no one is offering a definition we can use.”

“Critics of such patents … argue that they … have little connection to real, physical invention”

An invention doesn’t have to be “physical” to be “real,” and a blog called “Bits” might make a better effort to see the legitimate controversy here, now that we’re in a world of intangible bits and software. And since business methods are now usually manifested as business software (as with Amazon’s One-Click), such patents may still be valid when expressed as machine claims instead of process claims (and many software patents write their claims both ways).

But the real issue is not the “physical reality” or other form of patents, but what sort of patent regime promotes the greater good. Patents should reward hard or expensive work by granting a temporary monopoly, for the sole purpose of encouraging innovation. And of course many new patents do the opposite by making inventors afraid of infringing on some obvious or non-novel patent.

A big problem with business methods patents is that they are just like the game played with fortune cookies in Chinese restaurants. Rather than adding “…in bed” to the end of the fortune you add “…on the Internet” to the end of any process you care to name and voila – one legally protected monopoly is there for the taking.
For example, “A shopping cart”…”on the Internet”; “An auction”…”on the Internet”; “A mathematical algorithm”…”on the Internet”. I’m surprised no one has patented “A newspaper”… “on the internet” – in fact, now that I mention it, the NYT better watch out – I’ll be trolling around for some ‘go away’ money as soon as my patent is approved (as it invariably will be).

I believe that, in principle, business method (BPM)patents could be valid- which is not to say that I endorse the present practise of creating legal thickets around ideas of dubious originality.

Systems thinking helps: A system is, essentially, a collection of related elements with a purpose. “Physical” patents relate to the uniqueness of the elements and/or relationships and/or purpose of a particular collection of “things”. Business methods, or software can be thought of as systems in the same way- in this case the “things” are abstract “knowledge bundles” that are put in a process (related) for a purpose. If we examine the idea of what physical “things” are, we will find that ultimately they are “bundles of knowledge bundles” as well. The IPR test can then proceed if the BPM can be mapped into a series of “blobs and lines inside a circle” in the same way as a physical widget or a chemical (where the blobs and lines are atoms and bonds).

The basic problem is really that the descriptions of the processes of innovation have remained qualitative for too long- which suits argumentative lawyers, but does not serve society well. I intend to change that.

Ken (#1): Why does business software need to be patented? Software (i.e., code) is just a bunch of text; there’s copyright for that. How does the temporary monopoly encourage innovation? All it does is hinder others from implementing a similar technology — even if it was not copied. I’m not advocating against patents; rather, I believe that business method and software patents have no place in the world.

Furthermore, patents (especially business method patents, which are abstract anyway) are written in a very convoluted, vague manner. “A newspaper on the internet,” you say (John, #2)? Well, that violates my patent on “A novel transmission vector for providing current events in a digital format through a interconnected network of electronic machines.” I’ll see you in court.

I guess it makes sense that a pharmco can patent a drug when it takes 800 millions to bring one to market. But developing an algorithm, which is essentially what a business model is, takes how much? A few hundred thousand, maybe.

Patents are good for one thing.
Letting large companies create a monopoly and maintain it to the determent of all of mankind, while raping all and sundry for as much money as they can steal, blackmail and ripoff everyone.

Patents should be like a tariff, nothing more, if you invent an idea you get a cut or percentage of each item sold, you will make money but you can’t screw the world because you had enough money to pay a lawyer into blackmailing the world.

I find it odd that anyone could suggest that you “can’t really ban something unless you can define it and no one is offering a definition we can use” is a reason to allow these patents to continue. I don’t think there are many/any other territories outside the US that actually allow business method patents! Surely it would be possible to copy the approach of the rest of the world?

U.S. patents & patent law are a classic case of a system with internal failures which bring about its eventual demise. Hey, it’s not only idiocy like Amazon’s one-click, it’s companies like Monsanto who are trying to patent their way to owning virtually all seeds and livestock. It’s fascism.

Netflix has a patent, that it says it will never enforce, on renting movies/dvds by mail. Of course the one-half of the business method, the Postal Service, is owned by me and you (the citizens of the USA). Public Policy should block such business patents built on our property. The above case would go much farther than that.

To me, the question is more one of providing a process for raising the “quality level” of patents. Which is to say, stop giving people patents on processes and logic patterns (computer programs) which are already documented or in use. If it turns out that this is not possible for some things, then don’t allow patents on things for those things.

It was the blind love in legal circles for patents and patent scope expansion that spawned the blight of business method and software patents in the first place.

And surely only someone giddy with love for them could make such an absurdly bogus argument as does Aharonian. The patent law does not need a rigorous and unassailable definition of “business method”. In order to rid us of them, it need only convey its clear intention, through new case law decisions if necessary, that liberal interpretations in previous decisions were wrong and that such things should not be patentable.

While most of us would regard the law in general as the servant of society, and patent law in particular as the servant of economic and technological progress, many patent system legal professionals seem to hold the opposite view. I wonder why…

A major problem with software and business method patents is that it is nearly impossible to search the prior art. Part of the prior art for the Amazon one-click patent is the open account — customer says to merchant: I want that, put it on my account; merchant recognizes customer, provides the item, and puts it on the account. This prior art can probably be found in Babylonian cuneiform. Unfortunately, the USPTO examiners don’t search places like Babylonian cuneiform to find and recognize examples of prior art.

Similar considerations apply to searching the corpus of all previous software programs to see if a particular algorithm or method was used there. Proprietary software code isn’t openly published, and an examiner would have to be an expert in a variety of computer languages and would need an enormous amount of time to search the code that has been openly published, attempting to recognize a method being used.

Business methods that do not qualify for patent protection may qualify for protection under trade secret or unfair competition law – outside US, say, in Russia. According to Russian Patents blog ( //russianpatentsblog.patentsfromru.com ), no specific provision of Russian patent law prohibits the patenting of business methods as a general rule, but Article 4, paragraph 3 of the Russian Patent Law does prohibit the patenting of (1) business administration and management methods, (2) programs for computer and algorithms, and (3) intellectual operations performance methods. Though (2) would seem to bar patents on any software-based methods, the Russian Patent Office has interpreted the statement in an increasingly liberal fashion. Given a dearth of litigation in the area of business method patents, however, and specifically in the area of Internet-based BMPs, it is unclear exactly how these provisions are to be interpreted.

You cannot patent something which is ‘obvious’ – “one-click” is obvious and is probably ‘prior art’. Amazon may have been the biggest first user but probably not the first (aren’t all Apple applications ‘one-click’?). Saying that embodying ‘one-click’ as software makes it patentable is also nonsense, this fails the ‘trivial’ test.

A “Business Process” is an ‘idea’ (and usually a weak one at that), it is not the ‘expression of an idea’. Algorithms fall under the same category thought admittedly they usually require some real intellectual effort and perhaps deserve some level of protection. Software is another ‘gray area’.

Perhaps what we need is to restrict patents to the original definition, and create new types of protection for these other categories of ‘invention’. I hope we do not have to wait for another Einstein in the patent office before this happens.

Business method patents are problematic not because of the effort involved, but because you can define methods so broadly as to encompass innovation far beyond what you might have envisioned, and then use that in an aggressive manner to stifle actual products and services reaching the market, which reduces competition and only benefits those who can encompass ideas.

Outside of business-method patents, inventors have to show that a non-trivial, non-obvious idea has a physical process associated with it that they specifically figured out how to create (not use or sell).

Business method patents are generally used as methods to forestall classes of competition, or as defensive moves to prevent another business from using a patent as a weapon.

There are a number of parallel lines of argument running here: First, are BPMs intrinsically patentable? I claim that they are if they can be depicted as an analog to a physical process involving connected parts. Many can, as a flow-chart looks rather like a machine. Algorithms used to not be patentable because mathematics was seen to be a “discovery” (of the workings of the mind of the Almighty) and not an “invention” (the workings of the mind of humans). Secondly, if they are patentable, do the patents that have been awarded pass the traditional IP tests of invention (original, non-obvious, non-trivial etc). Many don’t seem to, but we need to be careful to not apply retrospective logic- many things seem obvious once they have been shown. Thirdly, if they do pass scrutiny, are they fair? The original reason for patents was to encourage inventiveness by enabling the inventor a reasonable period of time to recoup R&D costs and make a living (ie profit) for a while, but not so long as to block further development by others.

If patents of any kind ever served their constitutional purpose of helping to advance useful arts (and there are many accounts that they were not doing so even before 1900), they certainly do not serve that purpose today. Therefore, since they are not doing the job they were intended for — indeed they are working against that purpose — they should be completely abolished.

Patents are no more than a way for large corporations to bash each other and crush individuals and small corporations who dare attempt to compete. The large corporations already have many other ways to do that; it serves no useful social purpose to continue giving them yet another tool for their nasty work.

Let me forestall objections by those who will bring up a small number of instances in which an individual or small business has successfully used a patent to beat off attacks by large corporations. Yes, a few such examples exist. They are so few that they do not outweigh the enormous harm the patent system has been doing to competition for many, many years. The patent system should be completely abolished. It does not promote the useful arts; it actually interferes with such advancement.

Several of the writers of the Constitution, Jefferson and Madison, I believe, were very wary of including the establishment of patents. They rightly forsaw the abuses rampant today. They reluctantly agreed to including a provision for limited patents and copyrights. Their fears have been proven correct. We should correct their mistake in agreeing to patents as quickly as we can. Remember, the Constitution does not mandate patents; it only gives Congress the power to create them. They can be abolished without running afoul of the Constitution.

The patent madness has gone on far too long. Whenever patents are granted, development of an industry is slowed dramatically. If we truly want to increase development by increasing competition, patents must be eliminated.

When citing the Constitution’s patent provisions and looking for clues as to how to resolve, it is important to mention the influence of Locke’s social contract theories on the document’s authors, most notably Jefferson and Madison.

Of course, the origin of patent laws are not great examples of the “natural-rights-and-social-contract” theory of government, but rather a parallel extension that more closely resembles contract law. To my layman’s understanding, this patent law philosophy describes the balance of benefits that the individual (the Inventor) and Society receive in the execution of the patent contract.

Basically, Society grants a 20-year protection to the Inventor, and in exchange Society gets a full description and publication of the Invention so that Society may examine it and further the art. Another way of saying it is that Society agrees to help the Inventor stifle competition for a set period of time in order to gain greater overall knowlege, i.e., a trade-off.

It seems to me that under this line of thinking, a good question to be asking is whether Society is getting a fair deal in exchange for these nebulous Business Method Patents. Of course, in the thousands of patents granted each year, there are bound to be some stinkers; so setting aside the 1-clicks and mail-in-DVDs, are we getting thousands of great ideas thrown open to the light of day? Furthering that line of thinking, in order to increase Society’s gain in these contracts, could these Business Method Patents (and perhaps other, run-of-the-mill patents) be given a shorter time to expiration?

If this country does not start respecting true inventors, the rest world will leave us in the dust in the dust. We will have little motivation to invent. Most everything we have is thanks to minds that see what most do not. It is a shame.

i have a hard time believing that once again the rant about “business method patents” stop short of defining, a business method?

is it an act of congress to require business to do certain things to get a contract? (we have at least one patent issued to Freddie Mac(?) that is basically a method to link desktop underwriter to the information provided by a mortgage applicant and matching the data to available programs … that certainly didn;t help with the mortgage mess but is the patent to blame? is it not a business method?

how about ensuring that a party actually gets paid when other “methods” prove less than optimal — clearing monies transferred from a smart card to secure the ID and transaction record? is that a business method? software? a patentable signal?

all of the rants and raves about business methods and software patents come from those unwilling or unable to look objectively at just what business is, let alone what business does today — do any of the commentators here have experience filing a patent?

what does your employer do? manufacture anything tangible? does that have any relevance to the business in terms of revenue, expenses and taxation? profits? innovation?

people do not buy patents or technology … people buy goods and services … that we do not manufacture anything tangible and that such manufacturing is largely a commodity is not an unfortunate reality … the value of our manufacturing and by extension our business is tied into the value of an information economy … moving bits around and trying to get pad or proper attribution is not an issue that should be taken lightly nor dismissed out of hand …

if a business method or software patent (btw, both NOT included in the Patent Reform Act being pushed by the Coalition for Patent Fairness — a group of primarily IT/Software companies) enables a party to get paid – wallah — what exactly is wrong about that invention being patentable?

Data Treasury has patents widely deployed for making electronic check images inexpensive — the Patent Reform Act includes an amendment to intervene on behalf of the banks — are these patents, held up as valid during re-examination, business methods? software? do you as a consumer see any reduction in fees and costs associated with the dramatic reduction in costs to clear checks electronically? as electronic images and reduction of paper? does the additional margin that is made by the bank that infringes the patent show up as increased margin? is that not a business?

will the taxpayers pay for these patents to get patent reform that further undermines both patent holder and inventors and also costs taxpayers by dint of special interest politics?

KD :: “Several of the writers of the Constitution, Jefferson and Madison, I believe, were very wary of including the establishment of patents. They rightly forsaw the abuses rampant today. They reluctantly agreed to including a provision for limited patents and copyrights. Their fears have been proven correct. We should correct their mistake in agreeing to patents as quickly as we can. Remember, the Constitution does not mandate patents; it only gives Congress the power to create them. They can be abolished without running afoul of the Constitution.”

Actually you are confusing individual rights with Constitutional authority … What would you put in place to “promote the progress of the arts and sciences”? Fixed pricing? A new era of Letters Patent issued by a Patent King? Based, of course, on the equity of access to the Patent King?

Copyright too is not guaranteed neither is trademark or trade secret for that matter — these are all statutory constructs. How did they harm competition in the US? any empirical proof?

It was only 1975 when Bill Gates wrote a letter to the editor of an early hobbyist magazine that software should not be free. Should we reevaluate that sentiment now?

All of the Framers (to my knowledge) understood the abuse of a grant of patents by a Royal … and, yes, they conceded that monopolies are bad. But, tongue-in-cheek — Thomas Jefferson was the first Patent Commissioner! And, the States were well ahead of the Constitution’s ratification as several issued State patents recognizing the Labors of the Mind … See the Massachusetts Constitution, one example …

The issue which is much more transparent is that in sports or banking the payment and attribution of said payments is a very bright line … Attribution to copyright holders in the form of participation in the revenues of movies by the actors themselves is another example …

How do you protect the inventors? What is the real argument behind a system that forces the inventor to pay for a search and examination of what she believes is patentable? You seen any bad movies lately? Where are the “bad patents”? Judged by whom?

As a patent attorney who has primarily represented individuals and small start-up companies for the past 15 years, I would say that while many of these posts are passionate in their language, they are misguided in their reasoning. Many of them express the idea that patents only help “large corportations” to “crush” small businesses and individual inventors. However, this is completely contrary to my experience. In fact, in many cases the ONLY protection my clients have had against theft of their innovations and technology advances are their patents. Imagine this situation: a start-up company develops a unique software program that competes with Microsoft and starts to attract business. When Microsoft decides to reverse engineer the software program and compete with the small business, how possibly could the small business survive? Microsoft can outspend it in advertising, undercut the price and sell at a loss, and generally drive the small competitor out of business. Microsoft would then own a market that it built by stealing the idea and hard work of another company. This and worse does (and has) happened in business. In contrast, imagine the same small company had a patent covering that software program. Now Microsoft has to actually consider whether or not to infringe the patent in order to take that market. The risk of patent infringement may cause Microsoft to take a license or even to buy the small company. (And before anyone responds by saying this example simply shows that patents are anti-competitive, please think about whether a BIGGER Microsoft causes more or less competition). Thus, for those of you who are genuinely concerned about small businesses and individual inventors, you should actually support the patent system because patents are one of the most effective protections (and in some cases the only protection) small businesses and individuals have against large corporations. I see it every day.

p.s. – I’m not saying the patent system couldn’t use reform of any kind – it certainly can be improved (hire more US Patent Office Examiners, provide better training on the technologies for them, allow open submission of prior art to the US Patent Office, allow the US Patent Office to use the revenue it generates for increasing its productivity (instead of syphoning off their money to build bridges in Alaska to nowhere), etc…). However, I am saying that abolishing the patent system entirely would absolutely be in the best interest of big companies and not in the interest of small companies and individual inventors. Don’t throw out the baby with the bath water.